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Broadcom, Qualcomm Set for Face-Off

Broadcom’s Hurlston: “we jumped on this early”

Irvine-based chipmaker Broadcom Corp. leads the race to ship the next generation of Wi-Fi chips, but rival Qualcomm Corp. is determined to launch a challenge in the fastest-growing segment of the market: mobile devices.

San Diego-based Qualcomm has targeted the smart phone and tablet segment to introduce its first set of fifth generation—or 5G—Wi-Fi chips early next year.

Qualcomm projects sales of Wi-Fi-enabled devices will double to some 2 billion units by 2015. Sales of Wi-Fi chips topped $2.8 billion industrywide, according to 2010 data, the most recent available.

“We think we’re going to be among the first to market with the mobile solution,” said David Favreau, vice president of product management at Qualcomm Atheros, the networking and connectivity unit created last year after Qualcomm acquired Santa Clara-based Atheros Communications Inc. for $3.2 billion.

The Atheros buy brought key Wi-Fi technology and a 26% market share in stand-alone Wi-Fi chips in 2010, according to Stamford, Conn.-based market tracker Gartner Inc.

The deal put Qualcomm just behind Broadcom’s 28% market share for standalone chips, which have a single function.

Broadcom was the 10th largest global chipmaker overall in 2011 with $7.1 billion in revenue, buoyed by its broad strength in communication chips. Qualcomm was No. 6 with $10.1 billion in sales, and is a leader in baseband chips, which connect mobile devices to wireless networks.

Broadcom’s early lead on 5G chips is based on expectations it will deliver a first set this summer. Its initial targets are modems, gateways and routers, with plans to move into computers and set-top boxes later in the year.

2013

Broadcom also has circled early 2013 for the introduction of its 5G Wi-Fi chips for the mobile phone and tablet market, setting up the head-to-head competition with Qualcomm.

“We jumped on this early to extend our lead in the wireless connectivity market,” said Michael Hurlston, senior vice president and general manager of Broadcom’s wireless local area network division. “We don’t offer product announcements until we have chips in customers’ hands.”

That’s a not-so-subtle knock on Qualcomm, which announced plans for its line of 5G Wi-Fi chips about a year in advance—and with much fanfare—at the Mobile World Congress in Barcelona in February.

The competition between the two chipmakers is bound to be fierce—the next generation of Wi-Fi chips promise extended battery life for smartphones and tablets, along with seamless and simultaneous connectivity in the home for multiple devices, and speeds three times faster than the current standard.

Customers in Common

Mobile device manufacturers typically use chips from both Broadcom and Qualcomm in their products. Apple Inc.’s new iPad, for instance, features a Broadcom chip for Wi-Fi, Bluetooth, and FM transceiver, as well as a controller and microprocessor, according to San Luis Obispo-based technology website ifixit. The new version of the tablet also features a Qualcomm modem that connects the device to cellular networks.

Qualcomm’s latest moves on Wi-Fi foreshadow a brewing challenge to Broadcom on combo chips.

Qualcomm has had little success in the segment so far, while Broadcom is a longstanding leader. It plans another try with the debut a Wi-Fi, Bluetooth and FM receiver combo chip next year, setting up a new battleground.

“They do pose a serious challenge to Broadcom,” Gartner research director Mark Hung told the Business Journal last week from London.

Stronghold

Broadcom had 73% of the $1.3 billion combo chip market in 2011, according to Gartner. Dallas-based Texas Instruments Inc. was a distant No. 2 with 20%. No. 3 Marvell Technology Group Ltd. in Santa Clara had a 3% share of the market.

The fight for market share on combo chips will play out in the years to come, likely driven by the growth of home-connected devices.

The evolution of the home-entertainment network, which syncs smart TVs, smart phones, tablets, DVR players and other devices, is projected to push Wi-Fi enabled video device shipments to 600 million by 2015, according to Scottsdale, Ariz.-based market tracker In-Stat, part of NPD Group Inc.

Qualcomm looks to have the best chance to make a dent in Broadcom’s stronghold on combo chips, according to Rick Schafer, managing director and senior analyst at New York-based Oppenheimer & Co. Inc.

“I don’t see anyone better positioned longer term to compete in combo chips than Qualcomm,” he said.

“Large Mountain”

Broadcom made a big push in January during the International Consumer Electronics Show to showcase some of its 5G combo chip technology. Some executives even suggested it could extend its market share in the combo chip market, according to analysts privy to those discussions.

Broadcom built its name in the segment and doesn’t plan to cede any business to Qualcomm.

“We’ve dominated combo chips for a long time,” Hurlston said. “They have a fairly large mountain to overcome.”

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